The Social Security calculates that the public spending on pension payments will rise from the current 13.6% of GDP to 14.7% of GDP in 2050an increase that would have been one point higher (up to 15.6%) if it were not for the impact of the pension reform approved by the ministry led by José Luis Escrivá.
This is stated in the report on the Projections of public spending on pensions in Spain published this Tuesday and with which the Ministry of Social Security Pension reform completes agreed with Brussels within the framework of the Recovery Plan.
In addition to reviewing the impact that the measures that have come into force have had to date, Social Security projects in the document that with the approved spending measures (among which the annual revaluation of pensions in accordance with the CPI stands out), Total spending for the period 2022-2050 will be 14.2% of GDP.
Social Security recalls in its document that the reform itself contemplates a “closing clause” or safeguard that stipulates that the Independent Fiscal Responsibility Authority (AIReF) will prepare a report on the sustainability of the system every three years starting in 2025 and, if not, corrective measures will be applied that the Government of the day will negotiate with the Toledo Pact. If they do not reach an agreement, this imbalance will be corrected with additional increases in the Intergenerational Equity Mechanism (MEI), that is, by increasing the additional contribution that is already in force.
For this corrective mechanism to be activated, pension spending less the contribution of public income due to the reform would have to be higher than 13.3% of GDPbut the Government estimates that the approved income measures (such as the increase in the maximum bases, the MEI or the solidarity surcharge) will represent a 1.8% of GDP, so the true increase in spending minus that extra income will be 12.4% of GDP, down from 13.3%, Therefore, it will not be necessary to activate that closing clause according to your projections.